Weekly Analysis and Recommendations: The USD/JPY drifted lower last week, driven by technically overbought conditions and a drop in U.S. equity markets.
The longer-term forecast is for a stronger U.S. Dollar versus the Japanese Yen. The catalyst behind this forecast is the outlook for higher U.S. interest rates, starting with the widely expected rate hike by the Fed in December.
Over the short-run, however, the USD/JPY may feel some pressure if investors continue to dump equities and if the Bank of Japan continues to take a wait-and-see attitude towards the economy rather than implementing fresh stimulus.
The first key report this week is Japan’s preliminary GDP. Quarter-to-quarter GDP is expected to decline 0.1%. Year-to-year GDP is expected to come in at 1.7%. A stronger-than-expected reading is likely to mean the BoJ will continue to keep its asset-purchase program at current levels. A lower-than-expected reading is likely to mean further stimulus at some point in the future.
This week, investors will get the opportunity to react to the latest U.S. consumer inflation data, too. Month-to-month core inflation is expected to rise 0.2%, or 1.9% annually. This will put it just under the Fed’s benchmark target of 2.0%. However, next month, the figure may rise to 2.0% or higher because last year’s steep drop in crude oil prices will start to be filtered out of the inflation equation.
Also on-tap on Wednesday, November 18 are the minutes of the last Fed meeting. Hawkish minutes are likely to put some upward pressure on the USD/JPY because they will highlight the divergence between the monetary policies of the hawkish U.S. Federal Reserve and the Bank of Japan. The divergence will eventually sustain a long-term bullish outlook for the USD/JPY.
Empire provides in-depth analysis for each currency and commodity we review. Fundamental analysis is provided in three components. We provide a detailed monthly analysis and forecast at the beginning of each month. Then we provide more recent analysis and information in our weekly reports.
Reports to Watch This Week:
Date Time Curr Event Forecast Previous
Sun Nov 15 |
All Day |
ALL |
G20 Meetings |
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6:50pm ET |
JPY |
Prelim GDP q/q |
-0.1% |
-0.3% |
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JPY |
Prelim GDP Price Index y/y |
1.7% |
1.5% |
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Mon Nov 16 |
8:30am ET |
USD |
Empire State Manufacturing Index |
-5.3 |
-11.4 |
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Tue Nov 17 |
8:30am ET |
USD |
CPI m/m |
0.2% |
-0.2% |
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USD |
Core CPI m/m |
0.2% |
0.2% |
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9:15am ET |
USD |
Capacity Utilization Rate |
77.5% |
77.5% |
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USD |
Industrial Production m/m |
0.1% |
-0.2% |
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17th-19th |
USD |
Mortgage Delinquencies |
5.30% |
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10:00am ET |
USD |
NAHB Housing Market Index |
64 |
64 |
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4:00pm ET |
USD |
TIC Long-Term Purchases |
20.4B |
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Wed Nov 18 |
8:00am ET |
USD |
FOMC Member Lockhart Speaks |
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8:30am ET |
USD |
Building Permits |
1.15M |
1.11M |
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USD |
Housing Starts |
1.16M |
1.21M |
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10:30am ET |
USD |
Crude Oil Inventories |
4.2M |
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2:00pm ET |
USD |
FOMC Meeting Minutes |
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6:50pm ET |
JPY |
Trade Balance |
-0.38T |
-0.36T |
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Tentative |
JPY |
Monetary Policy Statement |
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11:30pm ET |
JPY |
All Industries Activity m/m |
0.2% |
-0.2% |
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Thu Nov 19 |
Tentative |
JPY |
BOJ Press Conference |
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8:30am ET |
USD |
Unemployment Claims |
272K |
276K |
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10:00am ET |
USD |
Philly Fed Manufacturing Index |
0.1 |
-4.5 |
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USD |
CB Leading Index m/m |
0.5% |
-0.2% |
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10:30am ET |
USD |
Natural Gas Storage |
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12:30pm ET |
USD |
FOMC Member Lockhart Speaks |
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Fri Nov 20 |
12:00am ET |
JPY |
BOJ Monthly Report |
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Sat Nov 21 |
12:00pm ET |
USD |
FOMC Member Williams Speaks |
James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.